Hard money lender in Paterson, NJ.

I am a hard money lender in Paterson, and the buildings that change hands here are mostly frame two and three-family houses, brick storefronts with apartments upstairs, and the occasional narrow lot where a builder wants to put up something new. Paterson is an old mill city, so a lot of the housing is older than the people buying it, and the condition range on a single block can run from move-in ready to gutted.

That range is what makes the city interesting to investors and what makes careful underwriting worth the time. The same street can hold a renovated two-family that just sold to an owner-occupant and a vacant one with a failed roof two doors down. The river that built the city also shapes some of its risk, and I want to talk about flood exposure before a contract goes firm, not at the closing table.

As a private money lender, I read the file myself and sign the term sheet myself, so you hear a clear answer with the reasoning behind it. Below are the neighborhoods investors focus on, the building types that trade, and how fix and flip loans in Paterson, DSCR loans in Paterson and new construction loans in Paterson are structured when the deal is real and the seller wants an answer this week.

The building that trades most often is the frame two-family, frequently with a third-floor attic space and a basement that has taken on water at least once. On a full gut, the money goes into the heating plant, the electrical service, the plumbing risers and the roof long before anyone picks a countertop. I read the scope from the basement up and I ask the contractor what contingency they carry for what they find behind old plaster.

Three-families are common in the denser parts of the city and they sit right on the line between a flip and a hold. The buyer pool for a renovated three-family is narrower, often an owner-occupant who wants rental income from the other two floors, but the rent from three units can carry a long-term loan comfortably when the numbers are honest.

Mixed-use buildings, a storefront at street level with one or more apartments above, are a real part of the Paterson market along its commercial avenues. I lend on these as investment property. The questions are what the commercial space actually rents for, whether it is leased or vacant, and whether the residential units have their own meters and legal occupancy. A refinance appraiser will look hard at the commercial income, so I do too.

New construction shows up as infill: a lot where an older house came down, or a parcel the city sold, with a builder planning a new two or three-family. Those files turn on zoning approval, the flood zone of the parcel, the builder's track record on tight urban lots, and a budget that holds up to a line-by-line read.

The Passaic River runs through and around Paterson, and parts of the city sit in mapped flood zones. Whether a given property is in one of those zones is the local fact I care about most, because it changes the numbers on both a flip and a hold in ways investors tend to discover late.

Check the FEMA flood map for the exact address before the contract goes firm, ideally during attorney review. If the building sits in a special flood hazard area, a buyer using a federally backed mortgage will generally be required to carry flood insurance. For a flip, that premium becomes part of your future buyer's monthly payment, which can shrink the pool of people who qualify and pull down what they will pay. For a hold, the premium is an operating expense, and a DSCR loan is sized on rent against the full cost of carrying the property, so the insurance bill directly reduces how much the loan can be.

New Jersey also requires sellers to disclose known flood risk and flood history when they sell, and requires landlords to tell tenants whether the rental sits in a flood zone. Read the seller's disclosure closely, and plan for your own disclosure duties when you resell or lease the building.

None of this rules out a property near the river. It means you get an insurance quote early, put the premium in your pro forma, and price the purchase on the costs you will actually carry. A building outside the mapped zone and one inside it on the same street can be two very different underwrites.

Fix and flip loans in Paterson combine the purchase and the renovation budget in one facility. Rehab funds go out in draws once each stage of work is complete and inspected, so the money tracks the progress on site rather than the calendar. On an older two-family, I expect the early draws to cover demolition, mechanicals, the electrical service and the roof, with the finishes later.

I set the after-repair value from renovated sales close to the subject, ideally of the same building type, because a renovated two-family on the Eastside and one near the river do not sell to the same buyer at the same price. Bring two or three sales you think prove your number and I will tell you whether I agree. A written term sheet comes back in 24 to 48 hours, and the loan closes in 5 to 10 days subject to title. Pricing is set per deal and stated in the term sheet.

How fix and flip loans work

DSCR loans in Paterson qualify on what the property rents for, not on your personal income, so you will not be asked for tax returns or W2s. I need the leases, a rent roll, and evidence that the rent is being collected. In this city I also want the flood zone status and an insurance quote up front, because the premium sits on the expense side of the ratio the loan is sized on.

These close in 14 to 21 days. They fit stabilized two and three-families, mixed-use buildings with leased commercial space, and the refinance out of a bridge loan once a renovation is finished and leased. Pricing is set per deal and stated in the term sheet. If the rent only supports a smaller loan than you hoped, I would rather tell you now than let an appraisal tell you later.

How DSCR loans work

New construction loans in Paterson fund the land and the vertical build in one facility, starting at $150K and going to $1M+. The typical project is a new two or three-family on an infill lot, sometimes on land the builder already owns and sometimes on a parcel being bought as part of the same closing.

Before closing I review the contractor bids, a line-item budget and a schedule that matches it. Draws are released against the schedule of values as inspections confirm the work. On a lot near the river, I also want the plans to reflect the flood zone requirements for the site, since elevation and construction rules there can change both the design and the cost. Approved plans and permits matter more to me than the finish package. Construction loans close in 10 to 14 days once the file is complete.

How construction loans work

A Paterson BRRRR usually starts with a bridge loan. You buy a two or three-family that needs work, fund the purchase and the renovation with me, lease the units, and then refinance into a DSCR loan from the same lender once the building is stabilized. Keeping both loans with one lender means the person underwriting the refinance already knows the building, the budget and how the work went.

Plan the refinance on day one. Before closing on the bridge loan, know the flood zone status, get an insurance quote, and pencil the long-term loan using realistic rents for renovated units on that block. If the refinance only works at top-of-market rent with no insurance cost, the deal needs a lower purchase price. Pricing is set per deal and stated in the term sheet.

How the BRRRR bridge works

The after-repair value here is deliberately below the asking prices on fully renovated two-families nearby. Asking prices are not sales, and I would rather the flip work at a sold number than at a hopeful list price.

The buyer for a finished two-family is often financing with a mortgage that counts rental income from the second unit. A clean certificate of occupancy for both units, legal bedrooms and working separate utilities make that buyer's lender comfortable, which shortens your time on market.

If this same building sat inside a mapped flood zone, the future buyer's insurance cost would change what they could afford, and I would want the after-repair value set lower to match.